Archive for June, 2012

By Steven Cohen, Managing Director Softline Pastel, part of The Sage Group plc.

I recently realised that the term ‘cloud computing’ is not as broadly understood as I had assumed. Maybe it’s because I work in the tech sector that these buzz words are part of my everyday vocabulary but I was surprised to discover that 77% of professional accountants claim to have no understanding of what accounting in the cloud is.

This statistic comes from independent research we recently conducted. And what is interesting to me is that while a large proportion of professional accountants don’t know what cloud computing is, 53% would recommend an online accounting product to their SME clients. So, there’s obviously confusion out there because cloud computing and working with an online application is exactly the same thing. And accountants are clever people, so if they are grappling with the principles of the cloud, so must many others!

Cloud computing 101

When we refer to the cloud we’re talking about where the program is hosted, or stored, and the answer is that it lives on the web and not your computer. It’s the same as your Facebook account where all your information is stored ‘somewhere on the internet’.

Facebook (although I am not an avid user) is a great example. When you’re using it, I guarantee that you don’t think about whether it’s the latest version or if the information you see is the most current. You just know that the answer is yes and that somebody clever ‘out there’ is taking care of everything!!

Well the ‘out there’ is the cloud! Perfectionists will criticise me for this – but the heart of the argument is that the cloud refers to the web or the internet – they’re basically the same thing.

So, what are the advantages of the cloud?

I’m finding that in my personal life, things are getting messy. Between my desktop, laptop and iPad, my data is stored in too many places and I’m struggling to remember which version is the most current. But I firmly believe that this is the transition phase of migrating from the traditional way of doing things to having all my stuff working from the cloud. And I’m starting to make the shift by storing the documents that I work on regularly in Dropbox; a data keeper in the cloud. Dropbox makes sure that my data is always up to date and I can access it from anywhere, so I’ve already solved two main issues – my data is current and safe!

The anecdote: encyclopaedias go electronic

Remember Encarta – Microsoft’s excellent encyclopaedia that was around in the late 90s and early 2000s? I love this analogy. Let’s trace it from the beginning: For hundreds of years leading up to the 1980s, encyclopaedias like World Book and Britannica were actual physical books. There were usually 24 hefty books in a set; one for each letter of the alphabet as well as the annual year book which intended to keep the base information relevant.

Then a massive shift; encyclopaedias went electronic and two meters of shelf space in every home were freed-up. Encarta was available as a disk and offered something like 60 000 pieces of reference material including interactive images, timelines and maps. The ability to simply click links and jump around topics was great; you got the info you wanted quickly and knew it wasn’t dated. But can you believe that Encarta – this great invention – couldn’t have lasted for more than 10 years because the whole thing shifted to the cloud and is now called Wikipedia.

Books were our point of reference for several hundred years and now we just don’t use them anymore.

The moral of the story?

The world has changed – there’s a new way of doing things. Using the encyclopaedia example, no one questioned the shift to online – in fact it was a welcome progression, so why are we apprehensive about cloud computing when we make so much use of it already?

If businesses do not adapt to this new, and better, way of working, they run the risk of very quickly becoming prehistoric in their service delivery which is just not a sustainable strategy for success.

SIFE is a global NPO which targets the tertiary student population to make a meaningful contribution towards developing entrepreneurs and business leaders. SIFE is active on 1500 university campuses in 39 countries and challenges students to solve real business and economic issues within local communities. The objective is for SIFE teams to create economic opportunities in these communities by initiating outreach projects. Active students benefit by gaining hands on skills in entrepreneurship, financial literacy, environmental sustainability and business ethics. SIFE subscribes to the principle of empowerment, and the SIFE teams spend the academic year conducting outreach projects to make a sustainable difference to communities in need.

The debate around whether you are born to be a good leader or whether you can learn to be one has been raging since the dawn of time. There is however no denying the fact that the success of a business is very much linked to the success of its leaders. A good leader brings clarity and peace of mind to others by creating a clear vision for a business and leading people towards a common goal.

There are very specific traits that a person should possess to be a good leader. You must have the appetite for continuous self-improvement and a natural inquisitiveness or thirst for learning that will propel the team into a ‘forward-thinking’ and pro-active mind set. In the same vein, you must also be able to learn from your mistakes.

Having the ability to really listen to people is key for any business leader, as is the ability to connect with people on their level. It is however crucial to be self-confident but without being arrogant. Another particularly important trait is to be able to motivate people in a positive way. Act in a way that commands respect from others and then respect others as you would like them to respect you. Be consistent in your actions as it will go a long way in the prevention of confusion, and most of all: Be trustworthy.

South Africa finds itself in a rather unique situation where social pressure and political agenda often add many obstacles that business needs to overcome in order to tap into the country’s leadership potential. You literally have to become race agnostic as it continues to be a prevalent contentious issue in the South African landscape. Access to quality education and training, not only formal training, is another obstacle, and the creation of an effective mentoring and coaching program within any organisation is also something that needs to be carefully considered.

The task of getting people to play an active and solid role in the business starts by nurturing a culture of accountability. You have to encourage people to take risks, forgive them when they make mistakes and expect them to use their initiative and not merely follow orders. If you can get that right, you can create a culture where you will be challenged more often, for the better.

A flat hierarchical structure often lends itself to an environment where people are free to use their initiative. In this environment titles are less important and people are expected to speak up. It normally coincides with a more informal culture where process and procedure do not rule supreme but where the workforce is given the freedom to operate within a framework. It does however require a high level of trust, with a diminishing need to closely monitor the people involved. It results in a much more output focused culture where individuals are measured on their outputs delivered, rather than the amount of hours spent at the office.

There is no question that the task of creating a value system for a business squarely rests on the shoulders of the executive management team, which in essence forms the culture of the business. It guides the collective behaviour of employees and determines the personality of the business. The business leader should be the custodian of the corporate values and should exhibit them through his/her behaviour, to walk the talk as they say.

Values should be the only non-negotiable thing in a business. Your vision and goals might change over time but your values must always remain uncompromised. A business leader should use every opportunity to nurture and grow the value system within the business. For this reason the personal values of people employed by the company should strongly align with that of the business as it greatly contributes in building a strong value system.

There are a great many things to consider when it comes to building a business that is successful and visionary. It does however start with the business leaders and how they choose to lead their people.

Bursaries and scholarships increase value for employers and employees by improving overall skills levels. The South African 2012-2013 Budget made changes to the legislation regarding the taxation of bursaries and scholarships. Bursaries are generally employer deductible and potentially tax free to an employee or their relative.

Bursaries granted by companies can be divided into two groups: Open bursaries are granted to individuals who are not company employees, and closed bursaries are granted to employees or relatives of employees. Open bursaries are not taxable and provide a positive way for companies to make a difference to South Africa’s skills shortage by providing the means for individuals who are not currently employed to gain qualifications and skills.

Closed bursaries, granted to individuals who are employees, or a relative of an employee, can be tax free, partially taxed or fully taxed depending on the bursary amount and the employee’s annual remuneration amount. A closed bursary granted to an employee is exempt from tax if the employee agrees to repay the bursary amount should he/she fail to complete or pass their studies for any reason other than death, illness or injury.

According to the legislation, closed bursaries granted to a relative of an employee are taxable if the employee’s remuneration exceeds R100 000 and if the bursary value exceeds R10 000. To explain:

If the employee earns less than R100 000 a year, and the bursary amount is R8 000, then the entire amount is exempt from tax.

If the bursary is worth R12 000, then R10 000 of that amount is exempt from taxation while the additional R 2 000 is taxable.

If the employee earns more than R100 000 annually, all bursaries or scholarships are taxable.

To calculate the R100 000 limit, the entire income amount must be used and must not be ‘fourth schedule remuneration’. For example, the income must also include the employee’s full travel allowance. If remuneration exceeds R100 000 after the bursary is paid, then the untaxed portion of the bursary must be taxed.

From March 2012, the exempt portion of the bursary amount needed to be reported against a new code 3815, and the taxable portion of the bursary as code 3809, which has been re-activated. This enables SARS to see the total value of the bursary on the employee’s tax certificate.

The South African legislation regarding the taxation of bursaries and scholarships supports local companies that want to make a positive impact on the South African skills shortage and decrease poverty levels by providing both employees and non-employees with opportunities to study and gain valuable skills. This is an avenue that companies should understand and pursue in order to maximise the impact of their tax deductible contributions.

By Karen Schmikl, Legislation and Liquid Product Manager at Softline VIP, part of the Sage Group plc.

Karen Schmikl

When Softline VIP launched its first online payroll system, Liquid, we never dreamed the uptake of the product would be so astonishing. One year later, we have 900 clients that have signed up to Liquid, servicing around 8 200 employees. Liquid is experiencing tremendous growth for a young system and serves as a good example of the increasing shift in the industry towards an online mindset.

At the heart of Liquid’s design, was the development of an online payroll system that is user friendly. We wanted to make sure that the user did not need a trainer or a consultant, negating the need for human intervention to a large extent. The fact that a score of clients signed up – online – without even contacting Softline VIP, speaks volumes for the product.

I believe that online offerings will be playing an increasingly larger role in all markets across the board. The cloud is however far from replacing desktop applications and greatly compliments any desktop offering at present. The demand is certainly there with clients increasingly showing interest in the use of desktop solutions in the cloud. A solution that provides more accessibility and something that is not bound to a desk that can be used from anywhere, fits the description of what the market wants. New technology, such as the launch of HTML5 will further enhance this thinking by making online offerings platform friendly, further mobilising the market to use any device, anywhere.

The beauty of using an online solution is that you don’t need to be a technical IT guru to use the programme, you simply log on. You actually need to be more tech savvy to load a software programme on your desktop machine or laptop. Some of our users find themselves in rural areas and having access to a consultant or IT support is challenging, whereas an online offering eliminates the need. Connectivity does however remain a concern with many outlying areas only having access to 3G, if at all. Despite the fact, many still prefer an online solution as it makes financial sense.

If you had to look at an online offering purely from a software perspective, you would however be forgiven to think that it is the more expensive option. But when you consider the bigger picture, it may not necessarily be the case. Users do not have to worry about antivirus programmes, upgrading hardware, loading software, the running of a datacentre or making back-ups. It is part and parcel of an online offering in addition to a telephonic support centre for added peace of mind. It just makes financial sense, making it the ideal vehicle for SMEs who do not have the initial cash flow to afford the software infrastructure needed.

A year ago, very little people knew about online payroll systems. The enormous growth that we have experienced with our online payroll solution, clearly indicates that the market is considering different ways of doing their business. The demand for online solutions will continue to accelerate, slowly but surely closing the education gap and the fear of the unknown.

In about May 2010, President Zuma set up a National Planning Commission (NPC) under the leadership of Trevor Manual. The brief was to take an independent and critical view of the country (Task 1) and to draw up a vision and plan that would take South Africa to 2030 (Task 2). The primary objective of the plan was to eliminate poverty and reduce inequality; these being the two biggest problems facing the nation.

Task 1 was completed in June 2011 with the presentation of a diagnostic report describing the countries 9 most significant challenges. It’s not hard to guess what these were:

A sub-standard quality of education for the majority of black learners. More than 25,000 schools dysfunctional;

Too few South Africans are employed. Official unemployment at 26%;

A public health system in distress. Total deaths in the country doubled in the past 10 years and life expectancy now 49 years.

A divided society. Divisions in all societies still persisting 17 years after the abolishment of apartheid.

Poor public service performance with leadership and skills deficits, corruption and bribery, political interference and erosion of accountability.

Informal settlements that marginalise the poor. Massive divisions in settlement patterns being a legacy of apartheid.

Inadequate infrastructure with generation of missing investment in roads, rail, ports, electricity, water sanitation and public transport.

A growth path highly dependent on natural resource exploitation but unsustainable in a world seeking to protect the environment.

Corruption undermining state legitimacy and accountability.

Task 2 is not yet complete and is by far the most difficult part of the plan.

In the 2012/2013 budget Speech, government gave much attention to two of the nine key issues identified, infrastructure and job creation. Infrastructure investment expansion was listed as a priority with approved and budgeted plans of R845 bn announced. There was also a particular focus on the unemployed and an additional R4.8 bn was allocated to an expanded public works programme and new Jobs Fund.

We know that government’s strength is in policy making and not in the execution and implementation thereof. We also know that even if government could build schools, it can’t make children go to school; government can pay social grants but cannot create the necessary jobs required. Government needs parents, teachers and the business community to do this. For the National development Plan to succeed it therefore needs all of us to be active citizens – government, business and communities.

The Premier of the People’s Republic of China, Wen Jiabao was asked how China could possibly deal with its poverty and environmental problems given their immense scale. He answered by saying that when you multiply a problem by 1,3 bn (people) it is insurmountable, but when you divide it by 1,3 bn, it is easily solved.

By Charles Pittaway, Managing Director of Netcash, part of the Sage Group plc.

Charles Pittaway

Connected Services is a buzzword in the industry at present, though many people are still grappling to understand just how important it will become. I strongly believe that any business or personal solution simply cannot afford to operate in isolation. In order for software, handheld devices and hardware to offer something of real value, they will have to be developed to interact with one another.

In the face of the information explosion that is changing the way that we communicate at core level, I feel it necessary to take a step back and investigate where it all started. When Alexander Graham Bell invented the telephone in 1876, it was initially intended as a voice communication tool. The realisation that the telephone was able to transfer data set the wheel in motion for the evolution into the telex and faxing sphere. The connection of the humble telephone into cellular networks ultimately formed the foundation for the internet, which was the big game changer.

We now had the ability to transfer information and data across multiple platforms, which has had a tremendous influence on how we do business. An example is internet banking, which essentially allows two different banking systems to connect in order to perform a transaction. The user then receives a notification via SMS or e-mail, which brings two additional platforms into the equation, beautifully illustrating the concept of connected services.

The question however remains as to what further evolution may be on the cards for connected services and the ramifications it may have. There are currently two very different schools of thought in play. The advent of the cloud led to the creation of Software as a Service (SaaS), which essentially allows us to utilise software such as accounting and payroll solutions through the web on a pay per use basis. The traditional business model is however application based, where the software is downloaded onto a personal computer and utilised from your desktop or laptop.

I foresee these two schools of thought merging in the next five to ten years into hybrid solutions. In order to evolve into true connected services, both online and offline solutions will need to change its platforms to allow inter-changeable communication to take place.

The international business economy was non-existent 20 – 30 years ago. Countries were isolated and restricted to trade within its own borders. It has since developed into a global economy that is interlinked: Whatever happens somewhere in the world has a knock-on effect elsewhere. If you bring that same analogy back to connected services, then hardware, the internet and software has given rise to a global economy of technology. All the different vendors cannot operate in isolation and truly successful vendors and service providers will be the companies that get that right.

Inter-operability is already well on its way to becoming the next buzzword, paving the way for strategic alliances and agreements that will allow every application or software solution to be accessible from any device. Business Intelligence (BI) will become a key aspect in the process of collating all the available information in such a way that it will assist users to make intelligent decisions about their business. Imagine if you had your order system, warehouse, banking, accounting, distribution and every other aspect you can think of, connected with one click of a button? The vendors that can ultimately get all the links in the chain connected, will be king.

Connected Services allows for transactions to be owned by various vendors, whether it is a banking system, order system, e-mail or SMS. It is ultimately not about the number of systems to be linked in a supply chain, but how these systems interact to automate a total solution.

Software, Solutions & Insights

The Sage Group provides business software, services and support to small and medium sized businesses. Whilst the heritage is in the SME market, the company also has the experience and expertise to deal with the requirements of specific industries and larger organisations. Core solutions cover accounting, ERP, Payroll and HR, Business Intelligence, customer relationship management and retail software solutions to small, medium and larger sized companies.